June 18, 2009

Argentina's grain exporters reached a deal with the government late Tuesday (June 16) to pay farmers a higher price for grain in exchange for export permits, a representative of the CIARA-CEC oilseed and grain exporter chamber said Wednesday.

 

Under the deal, exporters will buy three million tonnes of 2009-10 corn and an additional 1 million tonnes of new crop wheat at a theoretical price set by the government. In exchange, the exporters will be ensured export permits for the surplus wheat and corn from the 2009-10 crop.

 

Spot corn traded for 449.60 pesos (US$119) per tonne at the Rosario Grain Exchange on Tuesday, while the government's theoretical price that farmers should receive was set at ARS527.

 

The new deal is expected to boost local corn prices, which have been trading at a discount due to a risk premium because of the government's intermittent closing of exports.

 

Still, stocks of wheat and corn over domestic demand will have to be confirmed by the agricultural trade office, or ONCCA, before the exports will be approved.

 

The agreement follows a similar deal struck last month for wheat exports.

 

On May 4, President Cristina Fernandez said exporters agreed to buy 1 million tonnes of old crop wheat at full price, which is the theoretical Free-Alongside-Ship price minus the 23 percent export tax. Exporters will then have to sell that wheat back to local millers at market price. In exchange, the exporters were guaranteed authorization to ship 1 million tonnes of 2009-10 wheat.

 

Local prices jumped over 20 percent following the agreement, with exporters back in the long-dormant wheat market.

 

The government hopes the new agreement will stimulate wheat and corn planting this season amid signs that the area planted with the crops will fall sharply as farmers continue a major shift to soy.

 

The Buenos Aires Cereals Exchange forecasts 2009-10 wheat planting of just 3.2 million hectares, down 30 percent on the year and the smallest amount planted since records have been kept.

 

"All signs are looking bad for wheat," said the Buenos Aires Cereal Exchange's top climatologist. "If you ask seed-sellers who's buying wheat, they say nobody."

 

Very little new crop wheat is likely to be available for export from the 2009-10 crop, as the government will only authorize exports once about 7 million tonnes are set aside for domestic consumption. Domestic demand for corn is estimated at about 6 million to 6.5 million tonnes.

 

Soy planting is likely to surge to between 19 million and 20 million hectares during the 2009-10 season, Sierra said. That would shatter the record set during the 2008-09 season, when farmers seeded 16.6 million hectares with the oilseed.

 

In addition to weather factors, the fact that soybeans are the only major crop in which the government doesn't control exports is spurring farmers to plant more of the oilseed. Argentina limits the export of wheat and corn to ensure domestic supply and to keep local prices down.

 

"All signs point to a continued expansion in soybean area," Rodolfo Rossi, the president of the Argentine soy growers association, Acsoja, said in an interview Friday.